Lower Aussie dollar a boost to the agribusiness industry

Over the past few months, the value of the Australian dollar has steadily declined in foreign currency exchange markets, particularly in comparison to the strengthening US dollar. This trend has been welcomed by some economists, including the Reserve Bank of Australia, as a beneficial development for the country's economy.

Food producers may constitute some of the parties assisted by a lower Aussie dollar, according to the National Australia Bank's recent report on the agribusiness sector.

The majority (74 per cent) of post-farmgate agribusiness participants considered business conditions to be satisfactory in the September quarter, the study found. Nonetheless, the overall rating for business conditions declined over the course of the quarter, falling to -6 from the -4 points recorded during the previous quarter. The bank explained that these results were caused by more people rating the situation as "satisfactory" rather than "good".

Although the sector continues to face challenges, the Aussie dollar's freefall has helped to mitigate some of these obstacles. Lower exchange rates can help to balance lower global prices for agricultural commodities. Consequently, companies in this sector may enjoy relatively stable margins into the coming season.

"The falling AUD is limiting the impact of downward movements in global wheat and dairy prices, providing a buffer for Australian producers," said Khan Horne, NAB's general manager for agribusiness.

In particular, confidence in protein was relatively positive, with sheep at 35 and beef at 14.

"While conditions have been challenging for many post farmgate agribusinesses, NAB's outlook for the sector remains bullish, buoyed by a favourable AUD and solid demand conditions in key markets," Mr Horne said.

Overall, changes in business confidence were driven largely by weather conditions, rainfall forecasts and commodity prices.